THE TRUTH ABOUT GROUPON: Yes, It Can Make Money—No, It Won't Be Easyhttp://www.businessinsider.com/blodget-groupon-analysis-2011-8/comments
en-usWed, 31 Dec 1969 19:00:00 -0500Sun, 02 Aug 2015 16:40:14 -0400Henry Blodgethttp://www.businessinsider.com/c/4e6d6e7a69bedd7a01000037Done SSun, 11 Sep 2011 22:29:14 -0400http://www.businessinsider.com/c/4e6d6e7a69bedd7a01000037
I don't like Groupon business model much.
<a href="http://diaocsieutoc.com" target="_blank">http://diaocsieutoc.com</a>http://www.businessinsider.com/c/4e614f9b69bedd722800000ehstadFri, 02 Sep 2011 17:50:19 -0400http://www.businessinsider.com/c/4e614f9b69bedd722800000e
Henry, I know this is an older article, but could you come up with the same positive analysis if the SEC says no-no to Groupon's GAAP accounting practices? I'm not sure if Groupon still has cash available, their accounting puts a mask on this issue! Capitalizing marketing expenses is a fairly aggressive intrepretation of booking costs, which normally would be recognized in the current period! Especially, if those costs are substantially related to their daily deal business?http://www.businessinsider.com/c/4e6120c969bedd4242000025Ted RubinFri, 02 Sep 2011 14:30:33 -0400http://www.businessinsider.com/c/4e6120c969bedd4242000025
This from the guy who led us all astray in the first internet bubble.
You are not even looking at how the founders are raping the company of investment capital (at an unprecedented rate). What happens when their dramatic margins go away because they are unsustainable, sales diminish because you cannot give away goods and services at a loss indefinitely, using current payments (of which only half of which at most belong to you) to fund operations, an indefensible mktg strategy, astronomical losses, huge overhead, and a absolutely ridiculous valuation, etc, etc.
Go back and BEG Google to buy you for 1/2 of what they originally offered.http://www.businessinsider.com/c/4e611ea969bedd4942000026Tyler DurdanFri, 02 Sep 2011 14:21:29 -0400http://www.businessinsider.com/c/4e611ea969bedd4942000026
Amazon continued to grow rapidly, acquiring customers, advertising, building out their operations…and losing TONS of money in the process. The industry didn’t just question Amazon’s business model, they questioned why it was still in existence. Amazon management new better. Amazon finally turned a profit about 6 years after it started operating and is now the world’s largest online retailer.
One of the major reasons why Amazon is as successful today is directly tied to the amount of investment that was necessary in the first few years of their rapid growth. Without that investment, without their focus on growth instead of profits they would not be in the leadership position they are in today.
A similar situation is occurring with Groupon. Although the numbers are far more favourable. Groupon is the fastest growing company in history. Fastest to reach 1 billion in sales and will probably be the fastest to reach 3 billion in sales by the end of 2011. If they wish to be profitable today, all Groupon has to do is reduce their marketing and customer acquisition costs. However, hyper growth is their goal and they have no intention of slowing down. Profits will come later. Right now they need to acquire customers, stabilize their operations and ensure merchants obtain a positive ROI in using their service. Insiders know that they are, in fact, doing all of these things.http://www.businessinsider.com/c/4e605dc46bb3f7036b000004DaveMFri, 02 Sep 2011 00:38:28 -0400http://www.businessinsider.com/c/4e605dc46bb3f7036b000004
Groupon 'grew' based on great restaurant deals. Those have gone away, now it's all spas and lessons of some sort. 'growth' in groupon world is email addresses, which means nothing. The next news out of Groupon will be layoffs or force reductions of some sort. Then it'll all be over.
Everybody is doing these deals, not just Living Social. Mamapedia. Angies list. Your local newspaper site. Groupon apologists are about to see just how quickly the internet can shun a once-popular website.http://www.businessinsider.com/c/4e5fc468eab8ea1546000004NormahThu, 01 Sep 2011 13:44:08 -0400http://www.businessinsider.com/c/4e5fc468eab8ea1546000004
I just wish business owners would look at what it is really costing them to participate. Too many are desperate for the next fix to keep their businesses open. If you are a business owner and are going to use Groupon, prepare yourselves by reading this article <a href="http://bit.ly/grouponphenom" target="_blank">http://bit.ly/grouponphenom</a>.http://www.businessinsider.com/c/4e5f38faeab8eae23400001fmobile jaw crusherThu, 01 Sep 2011 03:49:14 -0400http://www.businessinsider.com/c/4e5f38faeab8eae23400001f
We find that the numbers on the site does not match the real deals numbers.http://www.businessinsider.com/c/4e5f238e69bedda15c00001froller millsThu, 01 Sep 2011 02:17:50 -0400http://www.businessinsider.com/c/4e5f238e69bedda15c00001f
Do the owners have skin in the game? Not much and cashing out.http://www.businessinsider.com/c/4e5f1edc6bb3f7d11f000026mobile crusherThu, 01 Sep 2011 01:57:48 -0400http://www.businessinsider.com/c/4e5f1edc6bb3f7d11f000026
Growth is what will drive further investment, further subscriptions and further interest.http://www.businessinsider.com/c/4e5f1b0f69beddf843000030coal crusherThu, 01 Sep 2011 01:41:35 -0400http://www.businessinsider.com/c/4e5f1b0f69beddf843000030
Too heavy for this early in the morninghttp://www.businessinsider.com/c/4e5f0a93eab8ea0375000007Albert S. BittonThu, 01 Sep 2011 00:31:15 -0400http://www.businessinsider.com/c/4e5f0a93eab8ea0375000007
Henry good post and mimics some of the points I made on the same topic a few days prior. Appreciative if I may share with you audience: <a href="http://groupbuyingcanada.com/groupon-going-bankrupt/" target="_blank">http://groupbuyingcanada.com/groupon-going-bankrupt/</a>
It is not in Groupon's interest to turn a profit now at the expense of growth. Growth is what will drive further investment, further subscriptions and further interest. There are numerous examples of companies that have focused on growth instead of profits, Amazon being one. In comparison to Amazon, Groupon's situation and numbers look much more appealing. Groupon can actually be profitable immediately if they wanted.. Amazon could not afford that luxury. Sales through both thanksgiving and christmas season should shed further light on this market's growth. Looking forward to it.http://www.businessinsider.com/c/4e5ef033ecad04955f000002JMWWed, 31 Aug 2011 22:38:43 -0400http://www.businessinsider.com/c/4e5ef033ecad04955f000002
Groupon is not a winner. Obviously not. Traffic went down by 50% in July. Groupon is for coupon clippers. All their advertisements are about saving money insted of the actual return business value which is completely destroying their positioning. Before people comment on "Daily Deal" companies. Please learn something and dont sound ignorant when you're posting. 90% of the people listed here have no idea what they are talking about in terms of the Daily Deals industry,. ...http://www.businessinsider.com/c/4e5eb471ecad04ae6e000010Paolo AinioWed, 31 Aug 2011 18:23:45 -0400http://www.businessinsider.com/c/4e5eb471ecad04ae6e000010
Non-Marketing Costs is the real problem. If you subtract marketing costs from total costs you obtain a "non marketing cost per event" of 3,650 US$ in Q1-201. This represents 32% of revenues. Quite stable in the last three quarters. Marketing costs have to be halved, but also other costs. I think that the only way to do this is trough self-provisioning from known merchants.http://www.businessinsider.com/c/4e5eab8d6bb3f78661000002Cereal EntWed, 31 Aug 2011 17:45:49 -0400http://www.businessinsider.com/c/4e5eab8d6bb3f78661000002
Absolutely LOVE how the critics sit behind their desks reading what others do, trying to punch a hole in every business, expecting that they can do it better. None of you have a clue what it takes. Go start a billion dollar business yourself. Once you sell it, come back to me and we'll talk.http://www.businessinsider.com/c/4e5ea910ecad047954000013TacoWed, 31 Aug 2011 17:35:12 -0400http://www.businessinsider.com/c/4e5ea910ecad047954000013
So the hardes part of the bussines is to find retailers that are willing to pay a premium without any benefit. Please do understand that most of the deals do not result in profit but in losses for the retailer.
It also downgrade the brand. In the Neherlands I founnd a lot of retailers at terible locations or companies that seem at the brink of collapse.
Finding people that want to join the deal is not their biggest problem. Finding retailers that want to offer a killer deal (that kill the retailer) is the hardest thing.http://www.businessinsider.com/c/4e5ea5d36bb3f7ab3b00003eTacoWed, 31 Aug 2011 17:21:23 -0400http://www.businessinsider.com/c/4e5ea5d36bb3f7ab3b00003e
It is clear that the writer does not understand the business.
Not marketing is the problem but sale's. For most retailers Groupon is a real bad deal. I have brake it down for a retailer (friend of mine). A successful deal means the retailer is working a couple of months without income. A big change existing customers are using the deal and new customers will be one time customers. (Aftter one vist up to the next cheapest deal)For most retailers it is a worse deal.
So Groupon has a huge sales force that is continually targeting retailers to join the losing game. In the Netherlands it are mostly small retailers at C location that are traped. We also find that the numbers on the site does not match the real deals numbers. So for every deal a Groupon sale representative must do a lot of acquisition work. And I think this is the real cost. For every litle growth the need to add a new sales representative that is not even able to earn his own cost.
There is no doubt Groupon is a 100% losing game. But lucky enough for Groupon investors are not entrepreneurs and has no clue about making money with running their own company. So I give them a real change to rip off a lot of poor investors.http://www.businessinsider.com/c/4e5e75e8eab8eab74e000029Geroge PWed, 31 Aug 2011 13:56:56 -0400http://www.businessinsider.com/c/4e5e75e8eab8eab74e000029
Can Bernanke raise interest rates already - if interest rates were at some normal levels, pensions would not be so desperate to chase these dumb deals. If you are running a pension and you have to return 7% per year, what would you do? Buy treasuries?http://www.businessinsider.com/c/4e5e4e7c6bb3f71a29000029Dean WormerWed, 31 Aug 2011 11:08:44 -0400http://www.businessinsider.com/c/4e5e4e7c6bb3f71a29000029
How many shares do you own?http://www.businessinsider.com/c/4e5e4e536bb3f7612900002dSBSPWed, 31 Aug 2011 11:08:03 -0400http://www.businessinsider.com/c/4e5e4e536bb3f7612900002d
spot onhttp://www.businessinsider.com/c/4e5e4c1becad04ae29000013just.a.guyWed, 31 Aug 2011 10:58:35 -0400http://www.businessinsider.com/c/4e5e4c1becad04ae29000013
Henry, could you complete the analysis and give a rough sense of Groupon's valuation say a year from now under a set of profitability assumptions? i.e at break-even (with reduced marketing spend) and with reduced growth rates (maybe a few different ones... 10, 20, 30% CAGR maybe), what would Groupon be worth based on comparables? which would probably be online retailers like amazon, priceline, etc... ?
My intuition is that you would predict a price chart like amazon's, with today being near the peak -- the key difference being that the big run-up occurred in private rather than public markets.http://www.businessinsider.com/c/4e5e4481eab8eafb03000024InnesWed, 31 Aug 2011 10:26:09 -0400http://www.businessinsider.com/c/4e5e4481eab8eafb03000024
This has all been seen before... remember the early millenium? the dot com boom? the easy cash literally floating in the air!! What is the scary is the number of people trying to jump in on this new band wagon when there really is only so much that can possibly work.http://www.businessinsider.com/c/4e5e43a5ecad04f128000001larry wuWed, 31 Aug 2011 10:22:29 -0400http://www.businessinsider.com/c/4e5e43a5ecad04f128000001
@henry: Your chart on revenue from customers implies revenue per customer is accelerating. contradicts your later chart.http://www.businessinsider.com/c/4e5e42c86bb3f7d20f000040DaveKWed, 31 Aug 2011 10:18:48 -0400http://www.businessinsider.com/c/4e5e42c86bb3f7d20f000040
VC's and founders don't need IPO's anymore to cash out.
The tech bubble part 2, is in the secondary market.
This will end with another bang and a bunch of lawsuits.http://www.businessinsider.com/c/4e5e3acceab8ea1d04000002larry wuWed, 31 Aug 2011 09:44:44 -0400http://www.businessinsider.com/c/4e5e3acceab8ea1d04000002
Henry,
What does "existing customer" mean? those who joined the prior quarter?
Groupon has a monthly attrition rate of 4%. so if they stopped adding new subscribers, their subscriber base would vanish rapidly.http://www.businessinsider.com/c/4e5e37eb69bedde17900007ePeter VerkooijenWed, 31 Aug 2011 09:32:27 -0400http://www.businessinsider.com/c/4e5e37eb69bedde17900007e
Groupon is not a ponzi scheme, but it is a scam to steal the profits of desperate independent retailers.
Blodget won't understand that, or doesn't care, because he is part of the Ivy League lawyer/accountant/MBA crowd. To them that is what business means; leveraging, lending, letting, subletting, subdividing, cheating, scamming.http://www.businessinsider.com/c/4e5e3568eab8ea524c000041CPR GilWed, 31 Aug 2011 09:21:44 -0400http://www.businessinsider.com/c/4e5e3568eab8ea524c000041
Wake up Dean Wormer. Groupon is a winner..http://www.businessinsider.com/c/4e5e2f9eeab8eacf60000022Dean WormerWed, 31 Aug 2011 08:57:02 -0400http://www.businessinsider.com/c/4e5e2f9eeab8eacf60000022
Henry.
1) Does it provide a unique (or can it create a unique brand) product? No. (unlikley)
2) Does it have a defensable market niche, patents, licenses, franchise? No.
3) Does it provide a definable addictive benefit? Yes, but at a loss.
4) Is it profitable or projected to be profitable? No.
5)Do the owners have skin in the game? Not much and cashing out.
Why would anyone invest in a company like this?